Evaluation of dine-in restaurant location and competitiveness: Applications of gravity modeling in Jefferson County, Kentucky

Abstract

The selection of a quality site in a competitive market is critical to the future success of a dine-in restaurant. This paper focuses on the development and application of different forms of gravity models in the evaluation of a restaurant's location and competitiveness in Jefferson County, Kentucky. It also assessed the effectiveness of these applications empirically. Three models are presented, a market potential model, a complex gravity model, and a competing destinations or Huff model. The models incorporated into them the most significant variables affecting interaction with customers at restaurants. A correlation analysis was conducted on a sample of restaurants along a popular segment of local eateries in Jefferson County to determine if any statistically significant linear relationships exist between market potential or spatial interaction and real customer volume and longevity at the restaurant.Within a highly localized market area where restaurants are within close proximity and contain similar markets, a market potential model was unable to accurately capture the real conditions of this market. The gravity model was able to accurately reflect these conditions, but as the variables within the model were manipulated the strength of the correlation decreased and the model became less accurate. The highly localized study area indicated the importance of the site characteristics in attracting customers, as well as the importance of the appropriate selection of variables in modeling to reflect an accurate magnitude of spatial interaction.